Aktieselskabet Af 21. November 2001 v. Fame Jeans

• Decision Date: 29 April 2008
• Docket Number: No. 07-7105.,07-7105.
• Citation: 525 F.3d 8
• Parties: AKTIESELSKABET AF 21. NOVEMBER 2001, Appellant v. FAME JEANS INC., Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

525 F.3d 8

AKTIESELSKABET AF 21. NOVEMBER 2001, Appellant v. FAME JEANS INC., Appellee.

No. 07-7105.

United States Court of Appeals, District of Columbia Circuit.

Argued March 13, 2008.

Decided April 29, 2008.

Appeal from the United States District Court for the District of Columbia, (No. 06cv00585).

Monica P. McCabe argued the cause for appellant. With her on the briefs were Oliver N. Blaise, III and Mary E. Gately.

Robert L. Byer argued the cause for appellee. With him on the brief were Lewis F. Gould, Jr., Barry Golob, Maxim A. Voltchenko, and Matthew C. Mousley.

Before: HENDERSON, ROGERS and BROWN, Circuit Judges.

Opinion for the court filed by Circuit Judge BROWN.

BROWN, Circuit Judge:

For some reason, a pair of jeans labeled Jack & Jones will sell for the equivalent of $96. Clearly there is magic in the name, and Fame Jeans tried to capture that magic by registering Jack & Jones as a trademark in the United States. Aktieselskabet (Bestseller),¹ which generated the magic by selling Jack & Jones jeans elsewhere in the world, opposed Fame's trademark application. After the Trademark Trial and Appeal Board (TTAB) granted summary judgment to Fame, Bestseller filed this action in district court, alleging several new grounds for its opposition. The district court dismissed Bestseller's complaint, holding the new grounds waived because Bestseller failed to present them to the TTAB and because Bestseller's complaint failed to meet a new pleading standard the court thought Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), required. Bestseller appeals the dismissal. We hold the district court should hear new claims in a trademark opposition, and we disagree with the district court's interpretation of Twombly. Even so, some of Bestseller's claims are legally flawed. Accordingly, we affirm in part and reverse in part.

I

Bestseller, a Danish corporation, has been selling Jack & Jones jeans since 1990. By 2005, its business with the brand had expanded to include jeans, T-shirts and jackets, distributed in Europe, the Middle East, South America, and Asia. In the European Union alone, Bestseller sold nineteen million articles of branded clothing in 2005. It has registered Jack & Jones and related marks in forty-six countries, and it owns twenty-one domain names incorporating variations of the name.

In 2003, Bestseller decided to expand into North America; its competitor Fame Jeans appears, so far, to have stalled that expansion into the United States by assiduous effort at the U. S Patent and Trademark Office (PTO). Bestseller planned to begin operations in Canada, from which it would develop the brand into the United States. Accordingly, it applied to register the Jack & Jones mark in Canada in August 2004 and in the United States on December 6, 2004. Unfortunately for Bestseller, Fame had already applied to register Jack & Jones in the United States on January 9, 2004. As of their respective filing dates, neither party had tested the susceptibility of American consumers to the allure of Jack & Jones by actually trying to sell any jeans under the brand. Fame, therefore, filed its application under Lanham Act § 1(b), 15 U.S.C. § 1051(b), avowing its intent to use the trademark in commerce. Bestseller, on its part, filed under Lanham Act § 44(e), 15 U.S.C. § 1126(e), swearing it intended to use the mark and citing its 1990 Danish registrations.

Nine days after filing its U.S. application to register Jack & Jones, Bestseller filed an opposition to Fame's application to register the mark, alleging that Fame's registration was likely to cause confusion with Bestseller's Jack & Jones mark and interfere with Bestseller's application to register the mark. On January 30, 2006, the TTAB granted summary judgment on Bestseller's opposition. First, the TTAB pointed out Bestseller had admitted it never used the mark in commerce in the United States, and it explained foreign use alone gave Bestseller no right of priority here. Second, the TTAB held Bestseller's December 6, 2004, application junior to Fame's January 9, 2004, application.

Bestseller sought district court review of the TTAB decision, under Lanham Act § 21(b), 15 U.S.C. § 1071(b). In its complaint, Bestseller renewed its allegation that it had prior rights to the Jack & Jones mark due to its § 44(e) application, and it also claimed to have used the mark in the United States. In addition, Bestseller argued the court should apply equitable principles to give it rights in the mark, since it has used the mark around the world for seventeen years and Fame has never used it anywhere. Bestseller also added new claims that Fame's § 1(b) application was void ab initio for lack of bona fide intent to use the mark and that Fame misrepresented its intent to the PTO. The district court dismissed all the claims. The new claims it held waived; it agreed with the TTAB that Bestseller's § 44(e) application was too late; and it thought the misrepresentation claim fell short of its putative Twombly standard.

II

This Court reviews the dismissal of a complaint de novo. Stewart v. Nat'l Educ. Ass'n, 471 F.3d 169, 173 (D.C.Cir.2006). We first discuss two threshold issues on which the district court based most of its analysis.

A

Although a district court owes a certain degree of deference to the TTAB's findings of fact, both parties may introduce new evidence in a § 21(b) action. Material Supply Int'l, Inc. v. Sunmatch Indus. Co., 146 F.3d 983, 989 (D.C.Cir.1998) (citing 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 21:20 (1997)). The question before us is whether a party may also introduce new issues not brought before the TTAB. We join several of our fellow circuits in allowing new issues in § 21(b) actions. See, e.g., PHC, Inc. v. Pioneer Healthcare, Inc., 75 F.3d 75, 80 (1st Cir.1996); CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 674 (7th Cir.2001).

District courts have broad authority to review trademark decisions by the U.S. Patent and Trademark Office (PTO), both before and after the registration of a mark. They may order the PTO to cancel a registration "in whole or in part" or to restore a canceled registration, Lanham Act § 19, 15 U.S.C. § 1119, and during a civil action for infringement, a registration is only prima facie evidence that the registrant owns a valid mark, Lanham Act § 15, 15 U.S.C. § 1115(a); Am. Online, Inc. v. AT&T Corp., 243 F.3d 812, 817-18 (4th Cir.2001). In addition, district courts may authorize the PTO to register or to deny registration to a pending mark. 15 U.S.C. § 1071(b)(1). Courts use this power to remedy erroneous decisions of the TTAB in any of the various kinds of proceeding committed to it, including oppositions, cancellation petitions, and interferences. For a person challenging a TTAB decision, a civil action in district court is an alternative to review by the Court of Appeals for the Federal Circuit. Id.

The proceedings differ in important ways, with Federal Circuit review taking the form of an appeal and the district court alternative being an ordinary civil action. In a Federal Circuit appeal, the PTO transmits its record to the court, which "shall review the decision from which the appeal is taken on the record." 15 U.S.C. § 1071(a)(4). In an ex parte case, the PTO must also explain the grounds for its decision, "addressing all the issues involved in the appeal." 15 U.S.C. § 1071(a)(3). By contrast, in a § 21(b) action, the PTO does not automatically transmit its record to the court; rather, any party may, on its own motion, enter the record into evidence. Once entered, "[t]he testimony and exhibits" of the PTO record "have the same effect as if originally taken and produced in the suit." 15 U.S.C. § 1071(b)(3). The district court then decides de novo whether the application at issue should proceed to registration, or the registration involved should be canceled, or "such other matter as the issues in the proceeding require, as the facts in the case may appear." 15 U.S.C. § 1071(b)(1); see Material Supply, 146 F.3d at 990.

Fame presses the general rule that judicial review of agency action is limited to the issues presented before the agency. But this rule usually arises from statutes providing for judicial review, Sims v. Apfel, 530 U.S. 103, 107-08, 120 S.Ct. 2080, 147 L.Ed.2d 80 (2000), and it is certainly subject to statutory modification, Time Warner Entm't, Co. v. FCC, 144 F.3d 75, 79 n. 5 (D.C.Cir.1998); cf. Darby v. Cisneros, 509 U.S. 137, 153-54, 113 S.Ct. 2539, 125 L.Ed.2d 113 (1993) (APA governs exhaustion). Just so here: the Lanham Act directs a district court to conduct a new trial to decide whether an applicant is entitled to a registration. In that proceeding, the court may consider both new issues and new evidence that were not before the TTAB. This statutory mandate becomes clear from a comparison of § 21(b), containing the "issues in the proceeding" language, with the analogous provision in the Patent Act, 35 U.S.C. § 145, which lacks that phrase. Both statutes direct a district court to decide "as the facts in the case may appear." The "case" in question refers to the district court action, not the prior events at the PTO, with the consequence that the court should decide on the facts before it, even though they were not before the PTO. Accordingly, in both patent and trademark cases, a party may introduce new evidence. Am. Steel & Wire Co. of N.J. v. Coe, 105 F.2d 17, 19 (D.C.Cir.1939) (patent); Material Supply, 146 F.3d at 989 (trademark). While new issues, on the other hand, are barred in a patent case, DeSeversky v. Brenner, 424 F.2d 857, 858 (D.C.Cir.1970), under § 21(b), the district court is also to decide "as the issues in the proceeding may require." 15 U.S.C. § 1071(b)(1) (emphasis added). Like "case," the word "proceeding" refers to the district court action. Thus, in a § 21(b) action, a district court should decide on the...